Amazon and Ebay are two well-known brands of online shopping sites. They have evolved and grown from small firms to the giants of e-commerce today. In this essay, a comparison would be made between the two firms.
Questioning the types of business models Amazon and Ebay’s have employed and how they have evolved over time, the driving factors of change, and finally the future outlook of each firm help distinguish the trails both firms made to become the two leaders in the market of ecommerce. They are imperative in making a comparison between the two because despite being direct competitors in the same market, Amazon and Ebay’s business models are distinctly different. Both companies have altered business strategies over time due to different reasons as well. The one similarity maybe the size of market share and growth of both companies as well as the large customer base both possesses.
Addressing these issues would help analyze both firms from its inception up til this day as well as give an opportunity for propositions to be made for the firms’ future.
1. Multi-sided Platforms
One common but important feature between both firms is the fact that their business models are centered around being a multi-sided platform. A “Multi-sided Platform brings together two or more distinct but interdependent groups of customers.” (Ankaruju, 2010). Typically the basic two groups would be buyers and sellers and are together to interact with minimal intervention from the intermediary, maintaining just simple affiliation with the intermediary.
However, the success of a multisided platform depends on having a significant size of installed base of all sides of customers. The larger the number of buyers and sellers, the larger the value of the system as one group needs the other. This creates a “Network Effect”, which comes in forms of direct or indirect effects. Direct effects, also known as “bandwagon effect” (Leibenstein,1950 cited in Besen, n.d.) arise when
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